How many cows need to die?

A report in a national, well-respected, but not dairy-centric, publication (ok, Feedstuffs) last week suggested we might have to cull (kill) 1 to 1.5 million dairy cows before markets rebound.

Those are stunning numbers, suggesting we kill 10% to 15% of the U.S. dairy herd. After I picked my jaw back off the floor, I did what every self-respecting ag journalist would do: I started calling around to find out what the real experts are thinking.

In my three-person poll, and to a man they agreed, killing a million cows is far more than is needed. And 1.5 million is way out of bounds, which would drive milk prices into near-earth orbit and bring demand screeching to a halt.

At the same time, there wasn’t a lot of consensus in my poll either.

On the low end is Ken Bailey, a dairy economist with Penn State. “If we can remove 10,000 to 20,000 cows per month above normal culling levels and get stability in production growth, we’ll be fine,” he says. “With the loss of BST on the East and West Coasts, milk per cow has already slowed down.”

And cheese markets are already showing some strength, he says. Any signs to the market that production isn’t growing will signal buyers they need to start buying again.

On the other extreme is Mark Stephenson, dairy economist at Cornell University. “Four hundred thousand to 500,000 cows are pretty easy numbers to come up with,” he says. “The industry is effectively in demand shock, with exports and domestic sales falling a part.

“We were exporting 10% to 11% of our supply in the last year, and we’re looking at exporting just 40% of that this year. And domestic demand has been lackluster at best,” he says.
A 60% drop in export demand translates into 11 billion lb. of milk production left unsold. Assuming cows that are cull candidates are below average—says 18,000 lb./cow—suggests about 600,000 cows will have to processed through McDonalds and other burger venders. That’s a lot of hamburger.

Stephenson also worries and warns that the culling—and therefore the recovery—will be painfully slow. “This is not a short-term fix. It takes a while to liquidate herds,” he says. “Lien holders have to be dealt with, auctions have to be arranged. So it will take some time to do this.

“We could see a little bump this fall, but it could be a year before we see real recovery. By the time we do, the general economy will be in a place that domestic and export demand will pick up as well,” Stephenson says.

The man in the middle is Scott Brown, an agricultural economist with the Food and Agricultural Policy Research Institute, better known as FAPRI, at the University of Missouri. His analysis suggests killing 250,000 cows will yield about $2/cwt on the all-milk price.

“I keep thinking were 3 to 4 billion lb. in excess given where we are,” he says. That would suggest we need to cull 165,000 to 225,000 cows.

The good news, says Brown, is that milk, cheese and butter prices at retail are coming down. “The income effects of the recession are bad, but we have retail prices that should encourage consumption,” he says.

“So I don’t think we have to get rid of a million cows,” he says. “And whether we have some type of program, either private or government-sponsored, we have to be careful we don’t go too far in the other direction.”

Culling too many cows—say a million or more—will send retail prices sky rocketing. “We’re just so inelastic on the demand side,” he says. If you tighten milk supplies 10% by culling a million cows, you could greatly damage domestic demand just as it is starting to recover.

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Mike Reed3/12/2009 07:44 PM

Hi all that dosent sound like a bad idea with prices as low as they are for our milk why not dump four days worth of milkif even half of us did that once a month wede all make money and control our onw destinylets set the 20th of march as our first dump to make money day

Anonymous3/4/2009 06:19 AM

When Bailey says culling 10 to 20,000 above normal per month, how many months is he including? Because if it's 8 months at 20,000 above, that's about equal to Brown. I do think Stephenson is way high and would creat skyrocketing prices and demand destruction.

Pine Island, MN3/5/2009 05:47 AM

It is interesting how in times of war, the front line soldiers die by the thousands and the generals keep sending in more soldiers.... well let me tell you when you run out of farmers the masses will get hungry very fast, then it really doesn't matter how much food costs because there won't be any..... I am becoming a bit synical but lets just stop and look what is happening, It does not matter what I use for numbers, not only will I NOT make money this year but the reality is how many YEARS will it take for me to make up the extreme losses we are told to accept....I am told it does not matter what it costs to feed the cows, just pay up.... my response is pay with what...my blood, my first born...get the point! The grocery stores have it all figured out, people may not need new cars, plasma TV's, blue-rays,.... but they sure as heck need to eat. The experts keep saying that dairy food in the stores is getting cheaper..... I am sorry but take a closer look, my milk check is less than half from last year, is butter 2 for one? how about milk and cheese... not even close! The American farmer has been abused, stomped on, crushed, told that "You had the chance to lock in a profit, why didn't you??.... hind sight is 20/20. But if you remember last falls elevator feed bills $20/cwt was a money looser also, why lock in a loss, the last time I did that (only a couple of years ago) milk prices shot thru the roof, now what goes up has come crashing down. So the market says kill cows, the milk futures is screaming kill lots of cows, the financials are screaming kill cows, so guess what... cows are being killed. So when the market screams we need milk, just remember that it still takes 2 YEARS to get a female dairy animal to milk. Isn't there a better way? I have never been a fan of quota's, but having just invested in updating my dairy last year, why would anyone do what I just did given the facts that have occured since. European farmers enjoy all the benefits the city people have, plus they don't work 18 hours each and everyday.. and they have $ left at the end of the year. Their farms typically support 2 to 3 GENERATIONS comfortably, their animals are well cared for, the environment is well cared for.... maybe we need to look across the pond and learn a few things. One thing is certain, it is much easier to get a small group of people to agree on something than a large group. Ten years ago Minnesota had 10,000 dairy farms. Today we number 4,700, this time next year? Once we realize that we are all in this together and big vs small vs young vs old does not matter we will finally be able to move forward for our benefit! Just imagine if we dumped all the milk produced for 1 day. If we truelly have such an inelastic demand curve, then in reality 4 days of no milk marketed should get our mailbox price back to a breakeven, then go one step further and lets make a PROFIT, the rest of our society lives on profit, it should not be a dirty word for the farmer.